Heinrich Hiesinger, the chief executive of Thyssen-Krupp, said in an interview that Tata Steel must separate itself from a costly pension scheme for a merger of the steel giants to go through.
“Tata needs to separate its pension liabilities from the plants in Ijmuiden and Port Talbot, then we can talk,” Mr. Hiesinger told Handelsbatt.
The discussions with British trade unions and the British steel pension scheme are only a “first step,” Mr. Hiesinger said. Tata has some 15 billion pounds (€17.5 billion) in pension liabilities.
Sources within Thyssen-Krupp told Handelsblatt that a deal isn’t likely until summer at the earliest due to the complexity of the negotiations.
Mr. Hiesinger said Thyssen-Krupp is in discussions with other potential partners, but it still views Tata Steel as the best candidate for a merger, because it will have the largest synergy effects.
Faced with overcapacity in Europe, Mr. Hiesinger views consolidation in the steel industry as necessary to remain competitive globally, despite resistance from the ranks of labor at Thyssen-Krupp.
“We are doing everything at Thyssen-Krupp to increase the ability of the steel industry to compete,” Mr. Hiesinger said. “If the capacity problem isn’t solved, the steel industry will be forced to undergo a restructuring program every three to four years.”
The German steel giant also faces challenges in North America as Donald Trump threatens to impose a 35-percent border tax on imported goods and renegotiate the NAFTA trade agreement.
“The United States was previously a trailblazer of free trade,” Mr. Hiesinger said. “The current tone creates uncertainty.”
Thyssen-Krupp generates some €9 billion ($9.6 billion), nearly one-fourth of its total revenue, in the NAFTA trade region, which includes the United States, Canada and Mexico.
The company is currently building three additional plants for car parts in Mexico, where it already operates five such plants.
“Maintaining NAFTA is very important,” Mr. Hiesinger said.